Monday, October 08, 2012

Apple is falling to a key support level. It peaked around the levels I predicted, and has fallen fairly steadily since the iPhone 5 first weekend news of slow fulfillment. Now we have unrest in their Foxconn factory. The stock today has dropped and plateaued for the moment right below the 640 support level. AllAboutTrends provides this chart in their newsletter today for guidance on where the stock may be going:

Monday, September 10, 2012

In 2010, CES was all about 3DTV. I thought 3D would flop, or more prosaically, rapidly commoditize as just another feature in a flat screen TV. That certainly was what has happened.

The breakthrough would be to remove the 3D glasses, which is technically feasible as TV processing speeds up, but is just a lab project right now. On small screens I have seen a polarized approach to glasses-free 3D, especially to spice up videogames. Now the polarized approach is being tested on larger screens. A cheaper approach, but also years away, and in the demonstrations I have seen, an approach wtih a very narrow range of viewing (a small sweet spot for the 3D effect). The other method, using faster processing, would create multiple decent viewing angles.

In either case, not likely to hit CES until late this decade. Instead, the Next Big Thing is 4K TV - HDTV at much higher resolution. We should see multiple demo units at CES 2013.

Samsung has added some interesting twists on just having Instagram and other photo apps in your digicam. Like Nikon, they have easy sharing with Facebook et al. Beyond Nikon, and as a part of their fight with Apple, they offer their sCloud version of Apple's iCloud, which automatically uploads all your photos to Samsung's cloud. Other cloud services, like Dropbox and SugarSync also do this, and free you from the clutches of the phone vendor; still, this is a very good idea.

As a camera, it has a huge 4.8" view screen, 16 megapixe sensor, and a 21x optiocal zoom. Pricing unkown.

Wednesday, August 22, 2012

"The market can remain irrational longer than you can remain solvent" - John Maynard Keynes

When AAPL ran up into an interim peak in March, I asked whether AAPL has peaked? I used a chart which showed two potential pivots: at 593-601, which formed the interim top; and 668-677. We have now come to 675 and fallen off a bit. Apple's next big announcement is coming, and often stocks run up on rumor and fall on news. That may be all this is; or, is this the peak?

If you expand this thumbnail of AAPL's incredible run up, courtesy SlopeofHope, you will see a classic parabolic rise pattern. We saw it in 2008 with oil, which shot up to $147 a barrel then fell like a drill bit straight down over the next six months to $32. We saw it with the NASDAQ from late 1998 to early 2000, where it too fell like a dead cat from April to October of that year. And of course in stock after stock and commodity after commodity.

I ran a comparison of Google's thrust to its peak vs. Apple in my prior post, supporting the argument of a peak based on analogy. Here is the comparison to Microsoft's thrust up during the dot-com bubble, which shows Apple may have more room to run:

Word of caution: parabolic thrusts end badly, but by their very nature (underlying stampede of the herd) are unpredictable of how high they will run and when they will end. Arguing from a few analogies, like Google and Microsoft, is very thin to base a trade upon. The dynamic for Google several years ago or Microsoft in 1999 were very different than today. This is not an argument for "this time it is different," just a reflection of the über momentum behind parabolic rises, and how the emotion of greed (or for money managers, fear of falling behind) can run for a longer time than a short can stay solvent. Particularly so in this environment, of a Global Scramble for Yield; money managers have to have AAPL to keep up with their brethren, and boy do they enjoy the outsized yields so far.

Sunday, May 20, 2012

Facebook: Fakebook, FailBook, FacePlant, pick your favorite euphemism for the epic fail tepid offering on Friday (it hasn't failed, yet, although perception here seems to have become reality - no pop, fail). The first half an hour of trading was a mess, and some retail trades ordered right away didn't get filled until after hours. Amazing.

The NASDAQ head defended his software this morning in the NYT, claiming his system didn't cause the stock to decline. He blamed order cancellations for the trading delays. I guess he doesn't realize that the glitch led to trading confusion, which caused the brokers to back off selling to their retail investors, who then stood aside. So, does he believe that a slackening of buy orders didn't contribute to the decline?

I think all these factors had an impact. Some whisper numbers suggested the institutions would have been happier at $36 not $38; and I suspect that when they got pushed aside for more retail investors, they had less incentive to play for the first-day pop (where they sell off some of their position for a quick skim). Worse, letting the enthusiastic retail investor in early removed the piling-on that drives a first-day pop. For the savvy retail investor, if you can get a piece of a hot offering, the offering ain’t so hot.

Second lesson: there is a reason IPOs are done a certain way, and it isn’t all greedy bankers. Google tried to change it, and got a tepid offering. Perhaps the same occurred here. Stocks are not like normal commodities, in that they increase in perceived value as they rise, whereas as normal stuff sells more when it goes on sale. BTFD.

Thanks to the greenshoe, the underwriters most likely have avoided taking a bath. They came in to support the stock at $38. A Reuters piece, widely linked, estimated the potential cost was $2B, well in excess of the potential profit on the offering – indeed, in the JP Morgan derivatives “London Whale fail” level of a huge loss – but this reflects a common misunderstanding of the mechanics of an IPO. (Take a gander at this 'evil banker' sort of post on the economics of an IPO that exaggerate the upside and overlook the potential downside.) The greenshoe allows them to float an additional 15% in a hot offering - a potential profit enhancer - but also allows them to buy back shares in a cold offering as this one turned out to be. In effect, the 'shoe gives them a 15% short position which they can apply against buying back shares without cash. (And Reuters persisted with its misleading reporting even after the greenshoe was explained to them.)

Various investigations will sort out what went wrong. Fundamentally this is such a large float that the sort of first-day pop should not have been expected - even though the people-in-the-know almost universally expected a pop. I must confess, I too got caught up in the excitement; I thought it would open at $44, be driven down near $38 and then rise above $44 to end the day around $48. It did open around $44 – some services have it at $42.99 (WSJ), others at $45 – but of course it never climbed back above those levels. You can see the opening action in this chart:

Third lesson: Man is a herd animal. That is why we get booms and busts, bubbles and depressions.

Fourth lesson: It should have gone IPO in 2009, while it was still in the big growth stage. THAT would have been one glorious pop! And a lot of the value would have flowed to the retail investor, not just the insiders and institutional investors, as they would have caught the great 10x rise from then to now.

I do not expect the FB IPO to put a damper on the upcoming onslaught of other social mobile web IPOs. There are about the same number of $1B+ valued private social companies as public ones, and most will attempt to get public over the next 18 months.

Think of the pop that didn’t happen as the proverbial dog that didn’t bark. FB got out at a huge valuation! It now has a huge cash hoard to go roll-up the industry and solidify its tremendously advantaged position. It will spawn thousands of local millionaires, and they will become a new hoard of angel investors to increase the entrepreneurial fervor that has gripped SF and NY.

Final lesson: Don’t confuse buying a stock with buying a company. Facebook is stronger after their IPO, much stronger, even if the stock weakens.

Saturday, March 17, 2012

I was day-trading GOOG around 2007 when it went parabolic and then fell like a rock. A warning shot for what happened to the market in 2008. Been playing with AAPL in a similar way, and just saw it go parabolic. Is history repeating? First the collapse of AAPL and then the whole market? Check this chart out from Doug Kass:

I have seen a lot of commentary on this chart. "This time it is different!" GOOG was at a 50 PE while AAPL has drifted to a PE that is the same as the whole S&P (which makes sense given its market cap size - "regression to the mean" - It IS the mean now!). AAPL is still growing fast and has continued dominance of its sectors. Etc.

Stock predictions range from a low of $450 to a high of $750, with whisper at $1000, which would value AAPL at close to $1T.

Now, I am an Apple fanboy, and use my iPad and iPhone 4S constantly, eshewing my Android phone (Google Nexus - you get it, prior Google fanboy untll the stock popped), hardily touching my Windows netbook, and sitting in front of an iMac dreaming of a Macbook Air with a touch screen. But I am buying a stock, not a company.

That stock has produced. Looking back, it got to as low as $3.18 in 1997-8, whle generally hovering below $5. Bill Gates bailed out Apple for $150M back then. if Microsoft had held that stake, it would be worth over 100x - over $15B. Microsoft also bought into Facebook in 2008, and that stake will be worth a lot too, but the AAPL return is truly outstanding.

Parabolc runs always end badly, typically with a fall off a cliff shape. When GOOG fell, it had the expected bounce (wave 2) and then fell hard - look at the chart. But parabolic runs have no clear rules. AAPL may keep running. There are a bunch of stock market aphorisms around this, including don't get in front of a moving freight train.

One way to figure this out is to use techncial analysis. Here is a wave chart on AAPL, which says the recent tick at $600 could very well be the end: